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"Fine...I'll do it myself": Lessons from self-employment grants in a long recession period

Author

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  • Stjepan Srhoj

    (University of Dubrovnik)

  • Ivan Zilic

    (The Institute of Economics, Zagreb)

Abstract

This paper evaluates the effect of a self-employment grant scheme for unemployed individuals-designed to ease the first 12 months of business operation-on firm growth, survival, and labor market re-integration in Croatia in the 2010-2017 period. Grants offered a moderate amount of finances (up to 50% of average annual gross salary) and absorbed only 5% of funds allocated to active labor market policies, but accounted for 10% of new firms opened throughout the years. We use the universe of unemployment episodes and the universe of unlimited and limited liability firms to document the effect of self-employment grants both causally and descriptively. Exploiting longitudinal structure of unemployment episodes dataset, we find that individuals who finish their spell with a grant have a significantly lower probability of returning to unemployment. Also, we find that limited liability firms opened via a grant have lower growth potential and worse survival profile, while unlimited liability firms-even though a sizable portion of them closes after a required 12-month grant period-have a more favorable survival profile. While these results are in line with the rest of the empirical literature on the self-employment grants, we also find that the effectiveness of these grants has increased throughout the years, indicating towards the direction of institutional learning.

Suggested Citation

  • Stjepan Srhoj & Ivan Zilic, 2020. ""Fine...I'll do it myself": Lessons from self-employment grants in a long recession period," Working Papers 2001, The Institute of Economics, Zagreb.
    • Handle: RePEc:iez:wpaper:2001
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    References listed on IDEAS

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    Cited by:

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    2. Srhoj, Stjepan & Dragojević, Melko, 2021. "Public procurement and supplier job creation: Insights from auctions," MPRA Paper 110018, University Library of Munich, Germany.
    3. Mahmutaj Lura Rexhepi & Krasniqi Besnik, 2020. "Innovation Types and Sales Growth in Small Firms: Evidence from Kosovo," South East European Journal of Economics and Business, Sciendo, vol. 15(1), pages 27-43, June.
    4. Małgorzata Wosiek & Adam Czudec & Ryszard Kata, 2022. "Relationship between unemployment and new business registrations at the local level: the case of Poland," Post-Communist Economies, Taylor & Francis Journals, vol. 34(8), pages 1083-1108, November.
    5. Srhoj, Stjepan & Kovač, Dejan & Shapiro, Jacob N. & Filer, Randall K., 2023. "The impact of delay: Evidence from formal out-of-court restructuring," Journal of Corporate Finance, Elsevier, vol. 78(C).

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    More about this item

    Keywords

    self-employment grant; evaluation; unemployment; firm performance;
    All these keywords.

    JEL classification:

    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate

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